Top 5 trends in Automotive Industry of 2010
The Top 5 trends in automotive industry in 2010 will be:
1. Acceleration in Merger and Acquisition: As cash-strapped organizations in US and Europe look for “saviors” for some of their brands or subsidiaries, there will be an emergence of “Young Turks” from fast-growing markets like India (Tata Motors, Mahindra etc.) and China (Geely, Chery etc.). In addition there will be strategic partnerships between automotive OEMs with contrasting strengths (like Suzuki and VW or Chrysler and Fiat) to leverage their strengths on common platforms.
2. Entry into new geographies: New markets like India (with 11% growth) and China (9% growth) holds strong promise. As US new car sales dipped from 15+ million vehicles in 2006 to about 8+ million vehicles by the end of 2009, there is a shift in focus to these emerging markets. Some OEMs would leverage the existing presence of their alliance partners to enable an entry strategy, like Renault’s entry into China. With some other OEMs like GM, they have upgraded their GMDAT offices in Korea to develop market attractive mini-cars for India and Korea.
3. Reducing time-to-market for alternate energy vehicles: Cornered by the “green revolution” most automotive OEMs are forced to look for alternate energy sources like hybrids, electric vehicles, ethanol, bio-diesel etc. Seeing the success of Toyota Prius, all automotive OEMs are planning rapid prototyping and accelerate sourcing and commercialize their alternate fuel concept vehicles. This will consequently lead to a major change in their supply chains including energy and parts suppliers, pipeline and distribution agencies, energy storage and retail agencies.
4. Procurement collaboration: As referred in my previous blogs, automotive OEMs are coming closer to collaborate. This collaboration has been presently been more mature in areas of procurement, with BMW and Daimler showing affinity towards development of a common procurement platform on the lines of COVISINT of GM. Even Tier-1 suppliers are moving in this direction to collaborate for procurement from their lower-tier suppliers. This will serve three basic objectives; namely, de-risk OEMs against any supplier hegemony, enable procurement cost reduction through economies of scale and “right-sourcing” (instead of indiscriminate low-cost sourcing) and develop the desired traceability through the supply chain necessary for quality and regulatory requirements.
5. Focus on vehicle SCM: As credit availability becomes elusive and OEMs start depending more and more on their internal cash flows to finance investment opportunities, supply chain optimizations become quite imperative for OEMs to perpetuate sustenance. This supply-chain-restructuring needs to be carried out in each of the legacy and emerging regions due to changing volume shift from US and European markets to emerging markets of India and China. Sensing major increase in volumes, organizations like Honda and VW have already taken-up measures to rationalize processes and optimize supply chains in emerging economies to meet the challenges of future.
As automotive OEMs start to settle after the severe crisis of 2009 (except Toyota who are still reeling under major recalls) it remains to be seen how these trends would impact their performance in the next 12 months. It has been an observation that as the markets start to blossom most OEMs lose retrospective and swing back to the same age-old practices which has led to the crises. What is certain is that the emerging OEMs are catching up fast on the heels of the US, German and Japanese OEMs, and if they do not adapt to the changing market trends, survival will be a challenge.
